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Wednesday, Dec 6, 2023

Arcutis Growing Quickly Thanks to Its Topicals

Nearly eight months after debuting on the Nasdaq for $17 a share, late-stage biopharmaceutical company Arcutis Biotherapeutics has seen explosive growth in many aspects, including its stock price, which has gone up by $7.66, and its staff count, which has doubled to more than 50 since the start of the year. The Westlake Village company even will have to move its headquarters down the street on Townsgate Road to accommodate a need for more space. “It’s four times the size of our current office. The new office should last us for quite some time,” added Frank Watanabe, chief executive of Arcutis. “We will grow substantially in the coming year as we prepare to commercially launch our product. Probably the biggest growth will be growing out our commercial organization.” Watanabe is referencing one of its pipeline drugs, a topical cream to treat psoriasis. The drug, called ARQ-151, is furthest along out of Arcutis” dermatology-focused topicals; the team expects to report results from its Phase 3 clinical trial in the first part of next year with a goal of getting Food and Drug Administration approval in 2023. Other pipeline drugs include a foam version of ARQ-151 for the scalp, and topicals to treat hand eczema, vitiligo and alopecia areata — all skin conditions. Interestingly, Watanabe said dermatologists haven’t been seeing their regular patients in person but mostly online during the pandemic. As a result, they have more time and office space to see clinical trial patients. That’s significant because it means Arcutis” trials are moving quickly along the road to FDA approval. The stock price hasn’t been hurt by the pandemic either, due at least in part to a strong investor base, Watanabe thinks. The company is in so-called late-stage development, meaning it is relatively close to selling its products on the market. “It’s late stage, and investors view our data as being quite compelling,” added the Arcutis CEO. But the company still missed analyst expectations for its second financial quarter. Arcutis reported a net loss of $35.4 million (-94 cents per share) compared to a net loss of $8.3 million (-$4.69 per share) for the corresponding period last year. Analysts on average expected a net loss of -83 cents a share, according to Seeking Alpha. Still risks Cantor Fitzgerald, one of four analyst firms to follow Arcutis, mentioned in its second quarter note that there is still a high degree of risk when it comes to compounds awaiting FDA approval, although Arcutis reported that its clinical trials are ahead of schedule. “Setbacks could adversely affect Arcutis’s valuation,” Cantor analysts said in a second financial quarter note. “The possibility of clinical trial failures or setbacks of any nature could occur for compounds in development. Potential scenarios include: 1) the inability to reach primary endpoints; 2) undesirable safety characteristics; 3) inability to recruit patients, or 4) the need for additional trials to gain regulatory approval.” Analysts for Guggenheim, another firm with a close eye on Arcutis, also cited potentially poor market access for the company’s topicals and increased competition in treatments for psoriasis and atopic dermatitis. Thousand Oaks biotech Amgen Inc., for one, offers Otezla — a pill to treat plaque psoriasis. “Larger companies with more financial resources and incumbent agent(s) may retain market share, as they are highly established in the treatment paradigm,” Cantor analysts added. “This can pose a challenge as Arcutis aims to gain regulatory approval and launch new drugs in the dermatology space.” The late-stage biopharma described itself as in a “strong financial position” despite losses during its earnings call, reporting $224 million in cash, cash equivalents and marketable securities. Looking ahead several years, Arcutis will be hiring more field positions, mostly sales representatives. Watanabe believes the company can build a sales force in-house to effectively handle demand. “The dermatology specialty in America is not terribly big, it’s about 10,000 doctors and about half of those, maybe about 5,000 or less of those doctors are really important for the treatment of medical dermatology,” said Watanabe. Arcutis outsources its manufacturing and most of its clinical research currently. But Watanabe said the company will always have a fair bit of internal capability in those sectors: “I think that it’s really important to have that internal expertise if you’re going to partner. Otherwise, you don’t know what they’re doing and whether they’re doing it right or not. You could get yourself into trouble pretty quickly.”

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